Banking
Google to Begin Offering Checking Accounts in 2020
November 16, 2019
This week Google announced that it plans to offer checking accounts to customers in 2020. The news comes after the release of the Apple Card, Apple and Goldman Sach’s controversial joint project, in August; this week’s release of Facebook Pay; and the mass exodus by payments companies from Facebook’s Libra Association last month.
Titled as Google’s ‘Cache’ project, the accounts will be the result of a partnership between the tech giant and a selection of banks and credit unions. Thus far, Citigroup and a credit union based in Stanford University have been confirmed as partners, with more to be announced. Speaking on the venture, Citigroup spokesperson Liz Fogarty said the “agreement has the potential to expand the reach and breadth of our customer base.” Whereas Joan Opp, President and CEO of Stanford Federal Credit Union, remarked that the deal would be “critical to remaining relevant and meeting customer expectations.”
As of yet, not much is known beyond these partners and that the checking accounts will be in some way “smart” according to Google spokesperson Craig Ewer. Whether or not there will be fees attached to the accounts, or who will be the target audience remain unsure. The latter especially given Google Pay’s poor take up in America.
As well as all this, it is equally unclear what exactly Google will be bringing to banking that is new. In his statement, Ewer said that “we’re exploring how we can partner with banks and credit unions in the US to offer smart checking accounts through Google Pay, helping their customers benefit from useful insights and budgeting tools while keeping their money in an FDIC or NCUA-insured accounts.” Such “insights” and “tools” are yet to be expanded upon and may give cause to alarm, as the company has recently come under fire for its questionable use of data after it was revealed that Google has secretly gathered the personal medical data of 50 million Americans from healthcare providers; and has recently been accused of using both human contractors and algorithms to tweak search engine results, potentially exhibiting favoritism as well as a willingness to change results related to at least one major advertiser.
When asked by CNBC about Google’s plans to enter finance, Senator Mark Warner (D) was apprehensive, remarking that “large platform companies have not had a very good record of protecting the data or being transparent with consumers.” Warner, who was a tech entrepreneur before entering politics, believes more regulation should be in place as the number of tech companies looking to enter finances continues to increase, saying, “once they get in, the ability to extract them out is going to be virtually impossible.”
Such comments come in the wake of Facebook CEO Mark Zuckerburg’s testimony to Congress last month, in which he told the representatives: “I view the financial infrastructure in the United States as outdated.” Just how outdated Zuckerburg and his contemporaries believe it to be will become clearer as more of these Big Tech-Wall Street hybrids are released.
BlueVine to Enter Banking in 2020
October 28, 2019
BlueVine Capital, the Redwood City-based alternative funder, has announced today that it will launch its BlueVine Business Banking product in 2020, which will offer checking accounts that come with debit Mastercards, checks, and ATM access exclusively to small businesses. And just like many of the new competitors in the banking space, BlueVine Business Banking will be app-based, with access also being available through an online dashboard.
With the financial infrastructure and regulatory framework being provided by The Bancorp Bank, BlueVine is the next alternative finance company to look toward becoming a bank, a move which has proven difficult for companies who already tried, such as SoFi and Square.
“Historically, banks have under-invested in small businesses and as a result, small businesses have been left with products and services that don’t meet their needs,” said BlueVine CEO and Co-founder Eyal Lifshitz in a press release that claims only 9% of small businesses believe their banks meet all of their needs. “Credit is a core part of banking and with the addition of checking accounts to our existing suite of financing products, customers can have a truly seamless banking experience.”
Such seamlessness spawns from BlueVine’s goal to promote an integrated and instant banking model, Lifshitz told me. “No more waiting for ACH for two days, or for wires to come in. You press a button, you draw from your line of credit, and magically it’s in your checking account … It’s the way that we believe it should be. The fact that it’s not currently like this is incredible in our eyes. This is what we believe the future looks like.”
BlueVine Business Banking will offer customers 1.00% interest rates on their savings and aims to cut out many of the fees associated with checking accounts, as Lifshitz explained that there will be no monthly, excess, or ACH charges; and that wire fees will be a fraction of what they cost with traditional banks.
“We feel we have the ability to build a true small business bank. Finally, one that is built and designed for small businesses rather than one that is having them as the third or fourth priority on the list, which many of the larger banks do … We believe the reason we’re here providing alternative finance is because banking is broken, and our goal is to build better banking, not just financing, but overall better banking.”
National Business Capital & Services Expands into Cannabis Funding with CannaBusiness Financing Solution
October 15, 2019
Today National Business Capital & Services (NBC&S) announced it has begun serving cannabis companies. Through its new program, CannaBusiness Financing Solution, NBC&S is now accepting applications for loans starting at a minimum of $10,000 from firms in the industry that are over one year old.
“The CannaBusiness Financial Solution will allow business owners to seamlessly obtain the capital they need, and allocate funding toward either hiring new employees, purchasing inventory, marketing strategies, or any other business need right away, without government regulations hindering growth opportunities or having to give up equity,” explained NBC&S President Joseph Camberato. “We’re not a bank and the lenders we work with aren’t banks either, so it falls into a different area of commercial lending.”
CannaBusiness is available in the 33 states where cannabis is legal, be it for medicinal or recreational uses, as well as in Canada.
“It’s a rapidly growing space, no pun intended,” joked Camberato when asked about the differences in funding cannabis companies compared to the industries NBC&S has served in its 12 years of business. “It would still be underwritten, just like one of our normal businesses. But we’re definitely going to want to know a little bit more about the business and understand what exactly they’re doing, how they’re operating, and exactly what are they’re focused on.” They’ll also examine if the business is in compliance with state laws. Qualifying cannabis companies must be in business for at least 1 year, with a minimum of $10K in monthly revenue. There is no minimum FICO score requirement.
While it’s not the first funder for cannabis companies, NBC&S views the move as a step in the right direction to “get ahead of the curve” according to Camberato. “We’re living through a modern-day prohibition, I think in 20 years we’ll look back on it and talk about it with our grandchildren and be like, ‘wow’ … I don’t think people realize how big of a deal this really is, but it is a business and it is another industry that has bloomed in front of us, again no pun intended. I think it’s fascinating that we get to witness this and that we’re really at the forefront of it and helping folks get the funds they need to grow.”
Jumping off from the politically charged word of ‘prohibition,’ NBC&S’ Vice President of Marketing, T.J. Muro, noted that he believed cannabis legislation to be one of the few issues that can be bipartisan, saying, “Out of everything today in our political climate, I think it’s the one thing that has unified people in the political parties. The liberal side appreciates the cultural influence and significance there, and then on the more conservative side it’s the tax revenue.”
The upcoming Senate vote on the SAFE Banking Act will put this theory to the test. The bill, which would allow the cannabis industry wider access to banking, has already passed the House.
No Fees, Ever – Is Goldman Sachs Winning Or Losing The Online Lending Battle?
September 30, 2019
Peer-to-Peer lending in the United States died the day Goldman Sachs launched a rival online lending company in 2016. Armed with a low cost of capital and the trust of a household name, Marcus, as Goldman Sachs referred to themselves, sought to further disrupt consumer lending by eliminating every type of fee including late fees. Its pitch was simple, “No fees. Ever.” Three years later, the company still hasn’t caught up to competitors like Lending Club in origination volume (Marcus’ loan book is $5B vs. Lending Club’s $15B). Its fee-less model may also be backfiring.
Goldman’s consumer lending business has racked up major losses, according to the WSJ. “It spent heavily to buy startups and cloud-storage space, hire hundreds of techies, and build call centers in Utah and Texas. Loans have gone bad at a higher rate than that of rivals.”
For all of the bank’s early bluster, they were so afraid of negative PR, that they launched without a collections department, leading to significantly high bad debt, the WSJ reports. That has since changed. But where Goldman Sachs appears to have lost, they may still be on track to win. As a consumer “bank” Marcus can also accept deposits. It had collected $36 billion as of year-end 2018 and added another $14 billion this year so far. Goldman also scored a valuable partnership with Apple on a branded credit card. The pitch is a familiar one, “No fees. Not even hidden ones.”
Apple promotes its card as “Created by Apple, not a bank,” yet The WSJ ironically reports that Goldman spent $300 million creating the card for Apple.
In a Q2 earnings call, Goldman CFO Stephen Scherr said that the bank was shifting its consumer lending focus from Marcus to the Apple Card. “I’d also say that if you look at the level and rate of growth in the Marcus loan business, while it continues to grow and perform well, we have slowed the increasing growth in that in contemplation of taking on increasing consumer credit through the card business,” he said. “What’s important for us is that we look at this on a risk-adjusted return basis not simply on a return on asset construct.”
Competitively, however, Scherr couldn’t answer if the consumer lending business’s costs will ultimately look more like a fintech lender or a bank as they scale. “What I can tell you is that what we have built jointly with Apple both on the front end and on the back end is intended to be operationally resilient, but equally is intended to be efficient both in terms of the application all through the delivery and on the back-end and so my expectation is that the efficiency will be reflected in that, but again premature to sort of put numbers around it.”
Of note is that Goldman acquired or acqui-hired from Clarity Money, Bond Street, and Final.
Head of MyPayrollHR Charged in Massive Nine-Year Bank Fraud
September 23, 2019
When MyPayrollHR left thousands of companies and their employees high and dry without their paychecks earlier this month, suspicion grew that the company’s rather mysterious owner, Michael Mann, may have been involved in some unsavory business. New information has emerged that around that time, Mann voluntarily checked in to the US Attorney’s office in Albany and admitted to a fraud he’d been running for 9 long years.
Since then, according to the Department of Justice, “Mann fraudulently obtained at least $70 million in loans from banks and other financial institutions. He created companies that had no purpose other than to be used in the fraud; fraudulently represented to banks and financing companies that his fake businesses had certain receivables that they did not have; and obtained loans and lines of credit by borrowing against these non-existent receivables.”
He has not paid them back. By the end, Mann resorted to kiting checks, the DOJ claims, in that he wrote checks back and forth to himself at different backs to inflate the balance of one or more accounts.
His largest creditor, Pioneer Bank, is owed tens of millions. Earlier this month, Mann attempted to route funds meant for his customers’ payrolls to an account at Pioneer Bank. Pioneer Bank responded by freezing all of the funds, causing all of MyPayrollHR’s clients to get caught in the crossfire.
Mann is charged with Bank fraud. If convicted, he faces up to 30 years in prison and a maximum $1 million fine.
PNC Bank Launches Fintech Startup numo
September 3, 2019
Last week, PNC Bank announced its latest venture, numo, which aims to function as an internal startup, developing apps and other services to expand PNC’s operations.
The first such app is indi, a bank account for gig workers that is exclusive to mobile phones. Offering customers tax calculators, tax savings goals, and dynamics adjustments that react to how much they’ve saved, PNC is joining the list of financial institutions which are doubling down on banking apps. The numo accounts are FDIC-insured, are held at PNC, and include a Visa prepaid debit card.
Speaking on the benefits of indi, numo CEO David Passavant said, “How do you estimate your tax liability when you don’t have an employer doing it for you? We built a system with intelligence to estimate what you should set aside for taxes.”
Beyond indi, numo has two other projects in the pipeline. One of these is unknown as of yet, but the next to be launched will be a service for companies that run portfolios of retail properties.
Not the only announcement to come from PNC last week, the bank also revealed its partnership with the RippleNet blockchain network. Joining together to offer swift cross-border payments for PNC’s commercial clients, the news comes almost a year after the bank stated that it planned to partner with RippleNet in September 2018.
“The speed of doing business continues to accelerate,” explained PNC Treasury Management Executive Vice President and Head of Product Chris Ward in 2018. “And the efficiencies of RTP [real-time payments] allow our clients to not only keep pace, but stay ahead.”
Apple Card Partnership Sees Goldman Sachs Lending to Subprime Borrowers
August 25, 2019
Apple Card launched this month, and with it have come some complaints over the unforeseen damage that wallets can do as well as an official guide from Apple on how to tend to and clean your new credit card. But aside from aesthetic and hygienic concerns, the card’s release to the wider public has raised eyebrows with news of subprime borrowers being approved.
Forged from a partnership between Apple and Goldman Sachs, a bank known for dealing with corporations and the rich, the move seems out of character for the 150-year-old institution.
Rolled out initially to Apple employees as a test, rumors began to circulate of early adopters expressing surprise at being approved despite having FICO scores in the middling 600s. Then, upon Apple Card’s wider release, Ed Oswald came forward and spoke to CNBC about receiving his card, along with a credit limit of $750 and an interest rate of 23.99%, despite having a credit score of around 620.
But this is not the bank’s first foray into FICO’s less than 700. Since its launch, Goldman’s Marcus has issued $4.75 billion in personal loans, 13% of these going to borrowers with a FICO of 660 and under.
This 13% and the partnership with Apple are indicative of David Solomon’s tenure as CEO of Goldman Sachs, who has sought to expand into consumer finance following years of declining trade revenues.
And while this contrasts the bank’s history, the push for more access to credit is aligned with Apple’s values. In fact, in the 1990s, when the tech company was in talks with Capital One over a potential card partnership, Steve Jobs “had an aversion” to rejecting any customers who wanted to sign up. Such yearning for openness and ease of access has reportedly scared off other banks. According to CNBC, Citigroup was in advanced talks with Apple prior to Goldman Sachs’s confirmation, but pulled out of the deal due to concerns over the profitability of the partnership. Similarly, JPMorgan Chase, Barclays, and Synchrony all allegedly bid on the deal.
But what does such access mean? Well opening up credit to those with a less-than-proven track record increases the risk of losses due to unpaid loans. The speed with which funds are made available, the application and approval process takes two minutes, means that Apple Card could rival payday loans and alternative finance for those customers looking for more modest funding. And as well, the commodification and attention paid to the appearance of the card by Apple has led to it being viewed as the latest gadget from the company rather than a tool to use when financially necessary, as pointed out by Macworld, raising questions over how credit cards should be marketed.
On the topic of access, Ian Kar, the author of the Fintech Today newsletter said that “Apple is only making one card, so they have to target everyone … It’s not like they’re Chase with multiple cards like Sapphire Reserve to target a higher demographic and other cards for lower segments.”
This singular approach to credit joins Apple’s growing collection of services. Likely being pushed to account for the falling sales of the iPhone, Apple Card is the latest in a line of launches that includes Apple News+, Apple TV+, Apple Pay, and Apple Arcade.
This year, iPhone sales saw a drop of 12%, making up 48% of total Apple sales. While Apple services rose by 13% from 2018 to become the second largest segment of the company’s sales portfolio, being 21%.
When discussing Apple Card and its role in the bank’s ecosystem in an internal Goldman Sachs memo, Solomon, hinting at further partnerships, said “Apple Card is big, but it’s also a beginning.”
Jamie Dimon Among 181 CEOs Pledging to Look Beyond Investors
August 22, 2019
This week, JPMorgan Chase CEO Jamie Dimon along with 180 other CEOs published a statement committing themselves to rethinking corporate priorities and their responsibilities as leaders of business.
The majority of the Business Roundtable (BRT), a corporate lobbying group comprised of 200 CEOs that once was described as Obama’s “closest ally in the business community,” signed off on the statement, which outlines a number of vague commitments. Included are goals to deliver “value to our customers” by furthering “the tradition of American companies leading the way in meeting or exceeding customer expectations”; to deal “fairly and ethically with our suppliers”; to support “the communities in which we work” through “embracing sustainable practices across our businesses”; to compensate “[employees] fairly and [provide] important benefits”; and to generate “long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate.”
Such promises are in opposition to shareholder primacy, the belief that the purpose of a business is to create profit for stakeholders and the leading corporate philosophy in American capitalism, and are in in direct contradiction to the BRT’s 1997 statement which praised the shareholder-centric approach.
“We looked at this thing that was written in 1997 and we didn’t agree with it,” said Dimon following the statement’s release. “It didn’t fairly describe what we think our jobs are.”
Such a view is reminiscent of Dimon’s 2019 letter to JPMorgan Chase shareholders, which opened with “The American Dream is alive – but fraying for many,” and closed with “CEOs: Your country needs you!” Just as it is linked to fellow BRT member Larry Fink’s similar letter which discusses the growing trend of CEOs having political and social responsibilities. And topping these associations off is Amazon’s Jeff Bezos, another signatory of the statement, who in 2018 took an unexpectedly patriotic turn when he criticized other firms, such as Google, that pulled out of military contracts, saying, “If big tech companies are going to turn their back on the US Department of Defense, this country is going to be in trouble.”
More and more CEOs are stepping up to explain the moral vision of their companies’. Harvard Business School Historian Nancy Koehn says that this specific case of such espousing is a “response to something in the zeitgeist. They perceive that business-as-usual is no longer acceptable.” The reasons for such a change in approach could be changing trends amongst younger workers, such as employees’ demand that their employer believe in something beyond profit, the increasing number of consumers who factor a business’s social purpose into their purchasing decisions, and the constant threat of social media backlash.
CEO of Johnson & Johnson Alex Gorsky, who drafted the language of the statement, echoed this concept of CEO’s having a social vision when he noted that “there were times when I felt like Thomas Jefferson.” Standing in for the Founding Fathers in Gorsky’s vision are Pepsi, Walmart, Apple, and General Motors.
Reactions to the statement have been skeptical, with many critics calling into question whether any action will come from such words. “The bottom line is, I don’t think much is going to change,” commented Dick Bove, a Wall Street analyst. While Walter Olson, a Senior Fellow at the Cato Institute, said that “It’s not really clear whether they’re intending to replace any part of the system or do the same things as before, but … smile more.”
Bernie Sanders was more pointed in his reaction to the statement. “I don’t believe what they’re saying for a moment. If they were sincere, they would talk about raising the minimum wage in this country to a living wage, the need for the rich and powerful to pay their fair share of taxes.” Fellow primary candidate Elizabeth Warren also weighed in, saying that it was “a welcome change,” but “without real action, it’s meaningless … These big corporations can start following through on their words by paying workers more instead of spending billions on buybacks.”
The Council of Institutional Investors (CII), a group that promotes the interests of investors and shareholders, responded with concern, saying that “The statement undercuts notions of managerial accountability to shareholders.” “Accountability to everyone means accountability to no one … It is government, not companies, that should shoulder the responsibility of defining and addressing societal objectives with limited or no connection to long-term shareholder value.”
